Automotive: The Turbulent Times Continue

Last year we predicted that there would be no major reduction in the challenges faced by the automotive sector. And, unfortunately, we were right.

Turbulence continued throughout 2025 and the industry, once again, ranked highest in the annual AlixPartners Disruption Index. 

The sector continues to undergo huge transformation in the form of its dual, simultaneous revolutions: the EV transition and the digital revolution, in particular, the journey towards connected, software defined vehicles (SDVs). OEMs and suppliers are having to make these capital-intensive transitions in the face of significant headwinds. 

Geopolitical tensions (including tariffs) came to the fore in 2025, creating more unwelcome instability and impacting margins further. These tough economic conditions continued to impact vehicle affordability. Meanwhile, the pace of the EV transition has stuttered, compounded by policy reversals in the US, which has meant that OEMs and suppliers have had to take large write-downs to delay EV programmes, while also continuing to fund large incentive payments to keep sales of EVs ticking along. At the same time, Western OEMs and suppliers have faced increasing competition as Chinese OEMs and suppliers divert more stock globally (particularly their comparatively affordable EVs) from an oversupplied domestic market. 

Transactional activity remains an important strategic tool to navigate these times. Whilst, by its nature, the automotive industry often favours collaborations and partnerships over traditional M&A, 2025 also saw several large mergers and acquisitions, as industry consolidation to deliver resilience and economies of scale becomes increasingly important. Indeed, if it weren't for the historic national ties of many players in the industry (see further below), this consolidation would be far more widespread.

Activity update

Commercial vehicles (CVs) were at the centre of some of 2025's largest deals. After its initial announcement in 2023, Toyota and Daimler Truck finally entered into definitive agreements for the merger of their CV subsidiaries, Hino Motors and Mitsubishi Fuso Truck & Bus. The deal, which is expected to be completed in Spring 2026, aims to capitalise on synergies and combined expertise. 

Meanwhile, Tata Motors announced a recommended takeover offer for Iveco, valuing the truck business at €3.8 billion. Having demerged its passenger vehicle business, the combination of Tata Motor's pure play CV business and Iveco will afford it greater scale – and a European footprint – as it continues to focus on the opportunities in the CV market. And staying with HDVs, in the US, Terex Corp and REV Group announced their merger (with an estimated combined value of US$9 billion) and Federal Signal acquired Scranton Manufacturing for up to US$480 million.

The auto supply chain for ICE vehicles continues to shrink amidst terminal decline, driving Tier 1 and 2 supplier consolidation as the only way to maintain size and scale. Meanwhile, having the right EV and SDV integrated technologies to offer to OEMs often means suppliers have to make acquisitions. The largest announced deal in the sector in 2025 was the ongoing tender offer by companies affiliated with Toyota for Toyota Industries (with the latest offer, at the time of writing, valuing the latter at US$43 billion).

2025 activity

• Apollo-owned ABC Technologies complete its £1.8 billion takeover of UK headquartered TI Fluid Systems (announced in 2024); 
• American Axle and Manufacturing (AAM) acquire UK listed Dowlais Group for US$1.44 billion; 
• Infineon acquire Marvell Technology’s Automotive Ethernet business for US$2.5 billion – a deal aimed at accelerating and supporting the transition to SDVs; and 
• HARMAN International announce its acquisition of the ADAS business of ZF Group for €1.5 billion, as it aims to strengthen its position in SDVs and integrate ADAS capabilities into its digital cockpit and in-car electronic control units. 

2025 also saw continuation of the trend for partnerships between OEMs, with cost reduction and scale synergies as key drivers. Ford partnered with Renault, which will see the latter build two small BEVs for Ford in France for the European market. And GM and Hyundai are partnering to jointly develop five new vehicles, four for Central and South American markets and one CV for North America. Meanwhile, Renault and Geely strengthened their cooperation, with Geely agreeing to acquire a 26.4% stake in Renault du Brasil. 

Missing from the list of deals is significant domestic consolidation in China. Although Geely did take its subsidiary ZEEKR private for approximately US$2.2 billion and Dongfeng sold its 50% stake in Dongfeng Honda Engine to GAC Honda Automobile, what we are not yet seeing is significant combinations of legacy ICE OEMs, nor new EV OEMs, despite the severe overcapacity across the industry. In large measure, this is because the OEMs have the support of their local province or municipality – in the way VW has the backing of the State of Lower Saxony and Renault and Stellantis have French state ownership.

2025 saw a renewed focus on autonomous vehicles (AV). There were a significant number of collaborations as autonomous driving (AD) tech companies (often start-ups with constrained balance sheets) combined their expertise with Mobility-as-a-Service (MaaS) providers that want to monetise robotaxi services, as well as OEMs that make AD ready vehicles. Although there are too many to list in their entirety, examples include: 

• US AD tech company May Mobility partnering with Grab to roll-out AV ride hailing services in Southeast Asia; 
• the joint venture between Hellobike, Alibaba and CATL for L4 robotaxi trials in China;
• Pony.ai's partnerships with ComfortDelGro (to test robotaxi services in Singapore) and Bolt (in Europe for AV ride hailing services); and
• Uber's partnerships with Nvidia, Nuro and Lucid. 

However, there was also some pure-play M&A, as Uber acquired start-up Segments.ai to boost its AI and automation capabilities, and FAW acquired a 35% stake in AD R&D player Shenzhen Zhuoyo Tech Co. for US$505 million.

Meanwhile, in EV infrastructure, Bestinver (the asset manager for Acciona Group) deepened its alliance with Tages to develop the largest EV recharging network at petrol stations across Italy; Stellantis' Free2move car sharing service partnered with Ample to introduce Ample's battery swapping technology in Madrid and, in China, CATL partnered with Nio and Sinopec in a push to establish a nationwide battery swapping network.

Geopolitical tensions (including tariffs) came to the fore in 2025, creating more unwelcome instability and impacting margins further.

Outlook for 2026

It is clear that disruption will continue in 2026.

Chinese OEMs will continue to boldly expand their global footprints, which may take the form of collaborations and, potentially, acquisitions of an in-country presence. Of course, this may be impacted by the geopolitical climate, particularly if countries – including those in the EU – take steps to protect their home-grown industries. The EU's proposed Industrial Accelerator Act could spur a number of PRC OEMs (and their key suppliers) to accelerate plans to establish manufacturing bases in Europe. However, that would do nothing to help their excess capacity in China, and they will have to learn to contend with Europe's significantly higher cost base and regulatory burden.

Meanwhile, more Japanese, Korean and European OEMs will grow their manufacturing capabilities in the US in response to the Trump tariffs. However, with US domestic OEMs doing the same, this is unlikely to come via M&A.

Significant consolidation amongst suppliers is also necessary, but we will first see a further round of painful domestic job cuts and limited factory closures as companies get their own houses in order before they are ready to embark on significant M&A. Expect, though, to see several technology M&A deals by suppliers and OEMs, particularly if tech sector valuations soften. 

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